The regulation of bank corporate governance, executive remuneration and senior managers accountability

This chapter discusses an area of prudential regulation which has come to the forefront of regulatory policy since the last financial crisis. Due to systemic risk there is a public interest in banks being managed in a safe and sound way to minimise the risk of failure. This is not easy to reconcile with the general UK corporate law and corporate governance regime which prioritises shareholder value maximisation and encourages efficient risk taking (not so much through section 172 of the Companies Act but as a result of a broader framework of rules and norms), even if the risks involved are great. To this effect, there are now regulatory rules that prescribe banks’ board structure, the attributes of directors and senior managers, risk management and executive remuneration in banks. The discussion explores the current regulatory rules and identifies their strengths and weaknesses.